1. At the top of a new spreadsheet, create an “Original Data” section for the data provided for Home Cooking, with rows labelled “Output Units (number of deliveries),” “Hours of Delivery Time,” “Hours per Delivery,” “Variable Overhead Costs,” “Variable Overhead Costs per Hour of Delivery Time,” and “Fixed Overhead Costs.” Create columns for

“Actual Results” and “Flexible Budget Amounts.” Enter the data provided for HC in this section. You will have to enter calculations for actual hours per delivery, budgeted hours of delivery time, budgeted variable overhead costs per hour of delivery time, and actual variable overhead cost per hour of delivery time.

2. $kip two rows, and create a section, “Variance Calculations,” with rows for “Actual Costs Incurred,” “Actual Input X Budgeted Rate,” “Budgeted Input Allowed for Actual Output X Budgeted Rate,” “fipending Variance,” “Efficiency Variance,” and “Fixed Overhead Spending Variance.” Use the data from the Original Data section to calculate actual costs incurred, actual input times budgeted rate, and budgeted input allowed for actual times budgeted rate.

3. For Problem 1, use the data you created in step 2 to calculate spending and efficiency vari¬

ances for Home Cooking’s variable overhead in May 2007. For Problem 2, use the actual and budgeted fixed overhead costs in the Original Data section to calculate the spending variance for Home Cooking’s fixed overhead in May 2007.

4. Verify the accuracy ofyour spreadsheet. Go to your Original Data section and change the actual number of deliveries from 8,952 to 9,000. If you programmed your spreadsheet correctly, then the variable manufacturing overhead efficiency variance should change to

($972) favourable.

Spending and efficiency overhead variances, distribution. Package Postal Service (PPS)

operates a parcel delivery service. PPS’s costing system has one direct-cost category (delivery driver payments) and two overhead categories—variable delivery overhead and fixed delivery overhead. In 2007 it charged retail companies and mail-order catalogue companies $18 per delivery. Delivery drivers in 2007 were contracted at $6 per delivery. Variable delivery over¬

head for September 2007 was budgeted at $2.40 per hour of delivery time. Budgeted fixed delivery overhead in September 2007 was $144,000. PPS budgeted 100,000 deliver¬

ies for September 2007. Delivery time, the allocation base for variable and fixed overhead costs, is budgeted to be 0.25 hours per delivery.

Actual results for September 2007 were as follows:
Variable delivery overhead $ 72,000 Fixed delivery overhead $154,080 Number of deliveries 96,000 Hours of delivery time 28,800 Required 1. Compute the spending and efficiency variances for PPS’s variable delivery overhead costs in September 2007. Compute the spending and production volume variances for PPS’s fixed delivery overhead costs in September 2007. Comment on the results.
2. What problems might PPS face in managing

(a) its direct costs,

(b) its variable delivery overhead costs, and

(c) its fixed delivery overhead costs?